CCRE 2.0: Behind the Rebooted Platform With Vanderslice at Its Helm

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Vanderslice, known as “Slice” to his industry friends, took the reins at CCRE last year, leaving his position as co-head of Citigroup (C)’s U.S. CMBS group. Tim Groves, Citi’s then-head of CMBS capital markets banking, joined him. 

Understandably, the move came as a surprise to some. A pioneer of the CMBS industry, Vanderslice spent 30 years at Citi and created a tremendously successful business for one of the biggest investment banks in the world. So, the move to lead a non-bank at a time of cut-throat competition among financiers was a bold one. 

But, this isn’t Vanderslice’s first rodeo outside of the confines of investment banking walls.

“For me, it’s a little like going back to my roots,” he said. “I was at Salomon Brothers after business school, which was later taken over by Travelers/Smith Barney, and then merged together with Citi. My early roots were actually a broker-dealer and a non-bank. We made bonds and sold bonds which is exactly what we do here.”

Vanderslice reportedly wasn’t looking to leave Citi, but at the same time wanted to allow the upward progression of those below him, sources said. At the same time, CCRE was on the hunt for a new leader since its founder and CEO, Anthony Orso, exited the firm in May 2018 to become Newmark Knight Frank’s president of capital markets strategies. (Orso declined to comment on this article.)

By July, a new sheriff was at CCRE, a sheriff who packed serious heat in the form of his reputation and deep experience through various cycles and across products.

“I think it was great for the franchise and for the firm when Paul and Tim went over, as they bolstered the institutional presence at Cantor on the real estate side,” Jonathan Salter, a portfolio manager at Axonic Capital, said. “I believe a lot of other investors would echo that sentiment.” 

On the day Vanderslice departed Citi, he reportedly left the building at 390 Greenwich Street and went across the street to Wolfgang’s Steakhouse. That was at 11 a.m. and he was still there at 10 p.m., with colleagues filtering in and out to bid their adieus at what turned into an impromptu going away party. 

“He was in the same seat for 30 years,” Daniel Lisser, a senior director at Marcus & Millichap (MMI), said of Vanderslice’s move. “I think he saw CCRE as a great opportunity to create something. As we all know, since the global financial crisis, the banks are very regulatory-constrained whereas the unregulated institutions such as CCRE are not. He’s now a big fish in a small pond; at Citi he was a big fish but also dwarfed by other groups.”

In fact, CCRE was one of the first groups to start originating conduit CMBS loans post-crisis after its founding in 2010. 

“For CCRE, [hiring Paul and Tim] was a great choice in that it further enhances the credibility of the firm,” Rich Highfield, the president of Starwood (STWD) Mortgage Capital, said.

And as Stephen Bartlett, a managing director at CCRE who has been at the firm for nine years, put it: “It instantly sent the message to the market that Cantor was in this business for the long haul.”

Legacy lending

The professionals on CCRE’s senior team—which includes Bartlett, Baz Preston and Jared Noordyk—each have institutional backgrounds and previously held roles at top-tier companies such as J.P. Morgan, Deutsche Bank and BlackRock. Today, the team takes best practices learned from each of those platforms and puts them together in a non-bank, non-public company platform.  

“Paul is a real pro who has seen it all,” Jeff Fastov, senior managing director at Square Mile Capital Management, said. “We’ve collaborated on many deals over the years.  He’s great to work with because he’s very commercial, a straight shooter and creates realistic expectations. Cantor is lucky to have him at the helm.”

A Connecticut native with an undergraduate degree from Boston College and an M.B.A. in finance and management from The Wharton School at the University of Pennsylvania, Vanderslice got his industry start through a summer internship at Salomon Brothers real estate finance group, before going full time at the broker-dealer.

“I think there are only a few people out there who can talk about the early days of the CMBS market, which really started in the mid 80’s,” he said. “People forget the first SASB deals that were done, and we were involved in the first RTC securitization deal in 1991, M-1. It was an important deal because it set the servicing standard; it literally cut the template for every deal to follow.” 

Vanderslice fought it out in the CMBS trenches through multiple market crises, from the 1994 mortgage meltdown, to the Russian financial crisis in 1998 to — most recently — the global financial crisis. He watched — and survived — the market nosedive from $229 billion in 2007 to $3 billion in 2009 and the layoffs and exits that went along with that particularly painful time. 

“Through all those crises, you have a continuum; you remember things with a sense of history that you learned a long time ago that you can apply today,” Vanderslice said. 

When the CMBS industry dusted itself off after the global financial crisis in 2010, Vanderslice and his partners were busy  rebuilding the business at Citi. “It was kind of like here [at CCRE]. You had a smaller group left, and we built it back up from there.” 

“Night-and-day different”

Today, CCRE’s strategy is divided into multiple business lines: conduit lending and securitization; SASB lending and securitization; whole loan origination and distribution; bridge loans and CLOs; and agency CMBS. (Bonus: it’s the only non-bank with its own distribution platform today.) A direct lender for fixed- and floating-rate mortgage and mezz debt, conduit and SASB CMBS loans remain its bread and butter.

“Expanding the product suite was key to the progression here,” Bartlett said. “So we started out fixing the process, improving execution and expanding the product suite. We’re now leveraging that expanded product suite to build the platform and grow the team now we have all of those capabilities.”

“The other advantage we have is that we’re full service to the market,” Preston added. “We had someone come in the other day with a portfolio of multifamily properties who didn’t really know what they wanted to do with the portfolio. We were able to offer them a range of options spanning individual and portfolio conduit loans, bridge loans, SASB financing and agency execution. Having our own distribution is also critical benefit too; being able to provide clients seamless access to all of those markets via one platform, I think is pretty rare and unique.”

With each deal, the team’s track record is expanding, and the quality of its collateral is markedly improved when compared with CCRE pre-Vanderslice, several sources said. 

The quality of loans coming out of the platform today is “night-and-day different” compared with the past, one source told CO on the condition of anonymity.

And, when the the team sees a quality lending opportunity, it leans in.

In late 2018, CCRE and Keybank originated $152 million of debt on a portfolio of three multifamily complexes located in Northern Virginia, according to Trepp. The 10-year financing, split into a $85 million senior loan and $67 million of subordinate debt, landed in the CMBS market spread across three deals. 

April 2019 marked the official re-launch of CCRE’s shelf issuance with the $758 million CF 2019-CF1 CMBS deal. From the origination of each of the loans in the deal, to the quality of the collateral, through to distribution of the CMBS bonds, the firm proved to the market that it could deliver good quality deals. The deal included 17.4 percent multifamily assets and had an average loan-to-value of 57.2 percent. 

Next up, the $833 million CF 2019-CF2 deal, priced in late September, with the offering consisting of 48 loans made on 136 properties. The real estate behind the deal ranged from the redeveloped Uline Arena in Washington, D.C., to the Ocean Edge Resort and Golf Club in Brewster, Mass. The deal included 18.6 percent multifamily assets and had an average LTV of 56.7 percent. 

Offering conservative leverage and placing greater focus on the more investor-friendly asset classes isn’t a coincidence. 

“On average we have been approximately 2 percent lower in leverage, higher multi and lower retail than the industry averages,” Vanderslice said. “This is by design. We’ve also done several larger and creative financings: Rivet Apartments in Jersey City [a $42.5 million floater], The Stanwix in Brooklyn [a $63 million loan with a rake structure and mezzanine component] and Uline Arena in Washington, D.C., [a $120 million loan].”

CCRE teamed up with Starwood Mortgage Capital on the CF1 and CF2 deals. 

“We want to partner with folks who share a common view on credit quality and underwriting standards,” Highfield said. “We want to bring deals to the market that we are proud of, have strong credit quality and that check the boxes in terms of what investors want to see.”

Axonic has closed a handful of deals with CCRE so far this year.

“As an active real estate investor across the entire capital stack, we’ve enjoyed the experience of working with the team and are very excited to continue doing business with them,” Salter said. “We find them commercial, team players; they care about their relationships and it makes it really easy to do business with them,” he said.

 

Green means “Go”

That’s not to say it’s been an easy road.

“You don’t rebuild overnight, you’ve got to get out there and you’ve got to execute,” Groves, now CCRE’s head of CRE originations and banking, said of the rebooted platform. “It takes a while to convey that message out to the market and say, ‘Look, we can do all these different things.’ And it really comes down to the quality of what you’re originating and putting into deals. There’s a certain consistency that investors are already appreciating.”

Vanderslice and Groves had arrived at CCRE’s office at 110 East 59th Street with an initial agenda of four or five items: making a clear distinction between the underwriter and originator roles (the underwriters report to Vanderslice, while the originators report up to Groves); to create targets for issuance (but, “We’re not originating volume just so we can be top-of-the-league tables,” Groves said, “there’s no pressure like that here — it allows you to really pick your spots”); to hire someone to lead CMBS strategy and research; and implementing a formalized “greenlight” approval process where every single loan requires sign off prior to any written term sheet being sent. 

Ticking those items off the list, in October 2018, the firm hired industry vet Darrell Wheeler, most recently the head of structured finance research at S&P Global Ratings. It also nabbed four Cushman & Wakefield underwriters. 

“We have attracted new talent, which, with the new plan, will deliver best-in-class product offerings,” Groves said. “It’s entrepreneurial, we’re building the team, the process, capabilities and the product suite.”

“The green light process is a new process for us, and I think what that does is give transparency to the deals on the front end so there are fewer surprises on the back end,” Bartlett said, “And while someone in my seat might not like to have to put together a green light memo when I need to get term sheet out, it’s actually been beneficial to get everyone in a room and bang through a bunch of deals. That’s really been the biggest change I think since Paul has come and obviously all the connections that Paul brings with him and the [CMBS issuing] shelves that he got us on — it’s a vast improvement.”

The changes are a bid to improve transparency and make the experience more user friendly. 

“Part of what I heard outside — and I obviously checked the place out before I came here — was that the approval process was a little bit gray,” Vanderslice said. Now it’s a very cookie cutter and transparent process.”

Lisser, for one, said the process is “much better” in terms of getting back with loan terms and also the B-piece process.

“They just have a better handle on things,” Lisser said. “Not to be negative about the past regime, but Paul has the ability to do things the way he thinks it should be done and oversee the process, how underwriting is done and how term sheets go out. The whole process seems better. It gives me and the ultimate borrower a sense that it has been touched and seen.”  

“We recently acquired a Freddie Mac, floating-rate B-piece from them and it was an incredibly smooth process,” Salter said.

Further, CCRE is partnering with several other issuers and third-party sellers who CCRE had never teamed up with before or hadn’t in a long time, Vanderslice said.

“We’ve improved our ease of use and transparency; it’s really kind of like building a new track record,” he said. “With partners we want to be additive in every way: easy to deal with, loan metric additive, and distribution additive.” 

His credibility with senior management and investors coupled with his trading background make Vanderslice “able to get CCRE playing in the big leagues quicker than they would have done without him being there,” Lisser said.

As Highfield put it: “Paul is knowledgeable about the market and its appetites. You’re all going to market together and you need everyone to be on the same page in terms of what they contribute, and to have similar views on credit quality.”

And now the CCRE team is ready to rumble.

“I think the reputation of some non-banks is that they’re just getting the deals that the banks can’t do,” Vanderslice said. “They’re competing either on leverage, terms, price or giving more interest-only than the next guy. I think what we’ve done is we’ve proven that you can be a non-bank and still compete in the higher quality space.”